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MOSL: Morning India (7/December/18): 1. GCPL (ART FY18); 2. Financials (Acceleration in credit growth); 3. NMDC; 4. Muthoot Finance; 5. Coromandel International

MOrning India (7/December/18): 1. GCPL (ART FY18); 2. Financials (Acceleration in credit growth); 3. NMDC; 4. Muthoot Finance; 5. Coromandel International

 

Today’s top research idea

Godrej Consumer Products (ART): Subsidiaries’ weak op. performance drag overall return ratios

• GCPL’s FY18 annual report highlights subdued operating performance of subsidiaries leading to a) lower consolidated revenue growth at 6% to INR98.4b (Standalone: revenue up 11%) and EBITDA growth at 9% to INR20.7b (Standalone: EBITDA up 17%), and b) high consolidated CCC days at 29 (FY17: 35) v/s standalone CCC days at -30 (FY17: -12) due to high working capital in Africa.
• This has led to consolidated return ratios (ROCE of 17% and ROE of 25%) being significantly lower than standalone return ratios (ROCE of 67% and ROE of 68%). Intangibles stood high at INR72.5b, 116% of NW (including goodwill of INR47.2b).
• Interestingly, GCPL has increased its future growth rate and decreased its discount rate estimates used for goodwill impairment testing.

Piping hot news

Highest in 2 years: Banks’ spread over deposit rates expands to 3.4%

• Banks’ spread on loans over deposits has expanded to a two-year high of 3.4%, led by an improvement in the CASA (current account savings account) ratio of banks. The spreads were higher, at 3.5%, in October 2016. On a year-on-year basis, the bank credit growth was 15.1% till November 23, while deposit growth stood at 9.4%, according to data from the Reserve Bank of India (RBI). The lower deposit growth amid higher credit growth has been a factor fuelling the liquidity constrains within the banking system.